Assume That a Face Value of $1,000 for Each Type

question 113

Multiple Choice

Assume that a face value of $1,000 for each type of bond. Yields are calculated to full maturity with semi-annual compounding. Yield change is the change in ask yield from the previous close.

$\begin{array}{|l|r|l|r|r|r|r|r|}\hline \text { Issuer } & \text { Coupon } & \begin{array}{l}\text { Maturity } \\\text { Date }\end{array} & \begin{array}{r}\text { Bid } \\\text { Price }\end{array} & \begin{array}{r}\text { Ask } \\\text { Price }\end{array} & \begin{array}{r}\text { Bid } \\\text { Yield }\end{array} & \begin{array}{r}\text { Ask } \\\text { Yield }\end{array} & \begin{array}{r}\text { Yield } \\\text { Change }\end{array} \\\hline \text { Pipa Co. } & 7.500 & 2012-\text { Aug-24 } & 120.92 & 121.02 & 5.41 & 5.37 & +0.011 \\\hline \text { Harolds Inc. } & 8.000 & 2025 \text {-Jan-10 } & 84.33 & 84.63 & 5.02 & 4.88 & +0.003 \\\hline \text { Willie Ltd. } & 6.250 & 2018-O c t-1 & 89.47 & 89.89 & 5.19 & 4.97 & -0.016 \\\hline \text { Kat Enterprise } & 8.250 & 2013-M a r-13 & 109.09 & 109.49 & 5.34 & 5.28 & -0.009 \\\hline\end{array}$

-If you sold 5 Pipa bonds on this day. How much would you receive from this transaction?

• A) $60.46
• B) $604.60
• C) $6,046
• D) $60,460
• E) $604,600

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Definitions:

Component Costs

The various expenses that make up the total cost of financing for a company, including the cost of debt and equity.

Market Values

The current price at which an asset or service can be bought or sold, determined by supply and demand.

Cost Of Debt

The effective rate that a company pays on its borrowed funds, which can include bonds, loans, and other forms of debt.

Flotation Costs

The expenses related to the release of new securities, encompassing fees for underwriting, legal services, and registration.